the pohang iron and steel company

8/6/2019 The Pohang Iron and Steel Company

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ROADBLOCKS FOR POSCO IN

INDIA

TABLE OF CONTENT

1. INTRODUCTION2. ABOUT POSCO3. POSCO ENTRY IN INDIA4. WHAT FARMERS VIEW5. WHAT GOVERNMENT SAYS6. WHAT POSCO WANTS7. CONCLUSION


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INTRODUCTION


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This project is about entry of POSCO in India and the road blocks that are being faced byposco in the six years of saga of POSCO in India. This project tells about problems thatare becoming barrier in the setting up of POSCO steel plant in jagdishpur district inodissa. The POSCO project was the dream project of odissa government that has beenstuck due to road blocks. In this project I have written the different opinions of the trivial

farmers ,government and the company. and keeping in mind all of the points I have givenmy conclusion on a possible solution to the problem of protest of POSCO plant in odissa(INDIA).


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The Pohang Iron and Steel Company, orPOSCO (KRX: 005490) (NYSE:P) KX(TYO: 5412) (LSE: PIDD), based in Pohsng, South Korea, is the world's second-largest steel maker by market value and Asias most profitable steelmaker.

Currently, POSCO operates two steel mills in the country, one in Pohang and the otherin Gwangyang. In addition, POSCO operates ajoint venture withU.S. Steel, USS-POSCO, which is located in Pittsburg, California.

With the strong Korean shipbuilding and automobile industry dependent on POSCO forsteel, it has been seen as the bedrock of Korea's industrial development over the past 40

years. POSCO's slogan is "Resources are limited; Creativity is unlimited"

History

19681971

In the 1960s, South Korean President Park Chung-hee's administration concluded thatself-sufficiency in steel and the construction of an integrated steelworks were essential toeconomic development. Since South Korea had not possessed a modern steel plant priorto 1968, many foreign and domestic businesses were skeptical ofSeoul's decision toinvest so heavily in developing its own industry. Despite the skepticism, under founderPark Tae-Joon's lead, POSCO was established as a joint venture between the KoreanGovernment and (then Korea Tungsten Company). It began production in 1972, justfour years after the company's inauguration in April 1968 with thirty-nine employees.

Japan provided the money for the construction of the initial plant, following anagreement made at the Third South Korea-Japan Ministerial Meeting in 1969. Financingincluded US$73.7 million in government grants and loans, US$50 million in creditfrom the Japan Export-Import Bank, and technical assistance from Nippon Steel andother corporations. This cooperation was one consequence of the normalization ofrelations with Japan in 1965 and reflected the view of the government of Japan as notedin the Nixon-Sato communique of November 21, 1969, that "the national security ofthe Republic of Korea is essential to the security of Japan."
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[edit] 19721992

POSCO first began to sell plate products in 1972 andfocused its sales policies on the domestic market toimprove steel self-sufficiency at home. It made

special efforts to supply qualityiron and steel torelated domestic companies at below export price tostrengthen their international competitiveness.

POSCO produced 6.2 million tons of raw steel in1980, recording a 13% increase over the previous

year, and was one of the few exceptions when almost all areas of the Korean economywere in economic depression. Domestic industries absorbed POSCO's major productssuch as automobile and home appliance manufacturers consuming hot rolled products,shipbuilding and construction and engineering companies consuming medium plates,andelectric motorand transformermanufacturers consuming electrical sheets. Some

over-produced products were exported to foreign countries but the significant import ofsections for construction left Korea as a net importer. Globally, POSCO was already themost efficient steel producer in certain products.

By the late 1980s POSCO's growth had been immense. It was the fifth biggest steelcompany in the world, with an annual production approaching 12 million tons worth 3trillion won. POSCO's continued to expandproductivityand size at a time when the steelindustries of the United States and Japan were declining. POSCO completed itssecond-phase mill at Gwangyang in August 1988. A third-phase mill completed in 1992further increased crude steel production to a total output of approximately 17.2 milliontons a year. In terms of productivity, POSCO was the world's best steel manufacturer

throughout the late 1980s and also was at the top in terms of facilities.

Pohang, previously a fishingport whose major industry was processingfish andmarineproducts, became a major industrial center with almost 520,000 people. In addition to thehuge integrated steel mill, Pohang became an industrial complex housing companiesthat manufacture finished steel products ofraw materialsprovided.

19921997

Changes in managerial systems and organizational structure accelerated in 1993 whenPOSCO'spresident and founder, Park Tae-Joon, who had wielded absolute managerialauthority for more than 25 years, resigned.

These changes were not without controversy however. Park Tae-Joon was ousted underthe Kim Young-sam government for alleged slush fund building and money
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laundering, which was later proven to be false, and went into "voluntary exile" in Japan.Most of the top management under him at the time were also fired. After the inaugurationof the Kim Dae-Jung government and Park's rehabilitation and climb to power, most ofthese former managers were returned to their previous posts at the state owned steelmaker. Then POSCO chairman Ryu Sang-bu and president Lee Ku-taek, and POSCO

Development chairman Park Doo-pyo and managing director Cho Yong-kyong, allreceived support from Park who later went on to become the Prime Minister of Korea.

With the change in leadershipfrom Park Tae-Joon to Ryu-Sang Bu, POSCO increaseddecentralization and diversification. POSCO's management emphasized greaterflexibility,autonomy, and consensual decision-making processes. The chairman alsomoved to devolve more autonomy to the profit centres and changing from a strictlyhierarchical organizational structure to one based on teams.

In July 1994, POSCO created two subsidiary companies, POSTEEL and POSTRADE.POSTEEL is the domestic sales and service arm of the company, while POSTRADE

handles international trading of POSCO products. Both subsidiaries commenced fulloperation in September 1994, with all international POSCO affiliates transferred toPOSTRADE by the end of that year. The landmark Posteel Tower onTehran Street, inSeoul's Gangnam district (not to be confused with the POSCO Center, also on TehranStreet) was completed in 2003.

19972000

In 1997, Seoul announced that it was going to transform POSCO into a privatecompany in line with the government's new policy ofprivatizinggovernment-ownedcorporations. The government planned to retain a majority share of thestock; initial

reports in the South Korean press in 1998 indicated that the sale ofpublic shares wasgoing slower than anticipated. However, the administration led by Kim Young Samchanged the initial policy direction ofprivatizationof POSCO and decided not to sellgovernment-owned stock to keep it as a government investment enterprise.

But, the Kim Dae Jung administration following the Kim Young Sam administrationlisted privatization ofpublic enterprise as a high priority policy in economic policyagenda to implement mainly because of outbreak of theeconomic crisis. The newadministration decided to privatize POSCO and by 1998, the South Korean governmenthad reduced its ownership ofshares in POSCO to less than 20%, and more than 50% ofthe shares in POSCO were in the hands offoreign investors. In 2000, full privatization

of POSCO was completed.

2001present

As part of the privatization process, new Chairman Lee Ku-Taek began efforts tointroduce a professional management and governance system of global standards forPOSCO. Under the new governance system, management made accountability toshareholders a priority. POSCO also introduced a new performance-based evaluation and
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compensation system. Throughout most of its privatization drive, POSCO increased itsrevenue and businessprofit. Thanks to robust demandat home and in China, POSCOrecorded the largest profits in the global steel industry in 2004. Net earnings fromPOSCO's array of steel products - used in everything fromscrews to skyscrapers- shotup 80% to $1.66 billion in 2004 from the previous year.

With increasing global competition, POSCO looked to China and India for newopportunities. South Korean wages were too high to support a whole range of activitiesand POSCO looked elsewhere for new projects while keeping the areas where they haveacomparative advantage inSouth Korea. By 2006, POSCO had 26 subsidiaries andinvested over $2.4 billion in fresh investment on mainland China, especially ingalvanized and stainless steelto supply globalauto and appliance makers that haveopened plants there. In 2006, POSCO started operating the Zhangjiagang PohangStainless Steel(ZPSS) steel mill capable of producing 600,000 tons ofstainless steelandhot-rolled products annually in Chinas Jiangsu Province. As a result, POSCO

became the first foreign firm operating an integratedstainless steel mill inChina,handling the entire production process from smeltingiron oreto finished products,including the cold rolled stainless plant it already operates.

In June 2005, POSCO signed amemorandum of understandingwith the State ofOrissa in India. Under the agreement, POSCO plans to invest US$12 billion to constructa plant with fourblast furnaces, an electricity plant, housing, and an annual productioncapacity of 12 million tons ofsteel, which is slated to start production in 2010. Theproject, which would start with a 3 million tonne capacity initially, would fetch revenuefor the government to the tune ofRs700 crore to Rs 800 crore (Rs 7-8 billion) annually.It would also provide direct employment to 13,000 people and ensure indirect

employment for another 35,000. The Orissa State government also promised to provide atotal of 600 million tons of iron sources, and will allow POSCO to use iron ore fromthese sources over the next 30 years. If the project goes ahead, it will be the single largestforeign direct investment in India as well as being the world's biggestgreenfieldsteelplant ever.

However, from 2005 till date (as of August 7, 2010), the India project has not been ableto proceed due to strong opposition from the local residents in the area proposed to begiven for the steel plant. There have been allegations that the federal and Stategovernments have been illegally trying to take lands and forests for the project, inviolation of the Forest Rights Act.[4] There have also been claims that the project will

only benefit the company while displacing more people than it employs, damaging theenvironment and taking India's mineral resources at a very low price.[5]

POSCO have pursuedinvestment opportunities in otherdeveloping countries such asVietnam andMexico. It was announced in August 2006 that POSCO will build a large-scale steel mill in southern Vietnam. POSCO plans to build the US$1 billion plant intwo phases forhot-rolled andcold-rolled products by 2012. When completed, the mill isexpected to produce three-million tons of steel products annually. Posco also plans to
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orest_Rights_Acthttp://en.wikipedia.org/wiki/POSCO#cite_note-3%23cite_note-3http://en.wikipedia.org/wiki/POSCO#cite_note-4%23cite_note-4http://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Developing_countryhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Steel_millhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Hot_rollinghttp://en.wikipedia.org/wiki/Cold_rollinghttp://en.wikipedia.org/wiki/Ton


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build a $250 million plant in the city ofAltamira, Mexico, to produce 400,000 tons ofgalvanized steel sheet a year forautomakers. The venture will be Posco's first whollyowned steel-plate plant in North America. Posco plans to begin construction in early2008, and start operations in 2009, producing galvanized and galvannealed steel.

On June 30, 2006, POSCO completed the construction of its sixth continuous galvanizingline (CGL) at its Gwangyang mill in the South Jolla Province. With this new addition,POSCO becomes the no. 2 producer of sheet-steel just behind ArcelorMittal

.

In early 2007, Warren Buffett's Berkshire Hathaway purchased a 4% stake in POSCO.

Management organization

Head Office

POSCO's Headquarters, along with the POSCO Center, form the 'brain' of the company,overseeing major tasks, such as themanagement, planning, andfinances of thesteelworks at Pohang and Gwangyang. The construction of POSCOheadquartersat 1Goedong-dong, Nam-gu, Pohang, was completed on April 1, 1987, and has sincebecome a structure that symbolizes the entire company.

POSCO Center

Winner of the 1995 Seoul Architectural Award for its progressive combination of moderndesign and eco-friendly engineering, POSCO Center is regarded as Korea's first state-of-the-art intelligent building. This landmark in the heart ofsouthern Seoul'sTeheranValley high-tech venture corridor also hosts a wide variety of free cultural programs,events, and exhibitions throughout the year.
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POSCO-India Private Limited is a subsidiary of POSCO, the worlds fourth

largest steel producer and one of the most competitive steel companies. POSCO

signed a Memorandum of Understanding (MoU) with the Government ofOrissa in

June 2005, to set up a 12 MTPA green field steel plant near Paradip, Jagatsinghpur

District, Orissa, with an estimated investment of USD 12 billion. The company will

build a 4 million-tons per annum capacity steel plant in Orissa, durinCorporate

Overviewg the first phase of its project , and expand the final production volume to

12 million tons per annum. POSCO-India Pvt. Ltd. was incorporated on 25th August

2005. The fate of the Rs 51,000-crore (Rs 510-billion) project hangs in balance after

a four-member Forest Advisory Council filed a split report on withholding

environment clearance, people in this coastal village, the hotbed of the resistance

movement, are worried about getting displaced. [1]

POSCO, the parent company operates two of the worlds premier steelworks at

Pohang and Gwangyang, having a combined production capacity of 31 million tons

per annum (MTPA). The Pohang steelworks produces 13.5 million tons of crude

steel and specializes in the production of small lots in a broad range of products,

including hot-rolled coil and cold-rolled sheets, plates, wire rods, electrical steel and

stainless steel. The Gwangyang works focuses on mass production of limited high-

demand products such as hot and cold rolled sheets, and produces 17.5 million tons

of crude steel. POSCOs products are shipped to over 60 countries around the

globe, satisfying some of the worlds most quality-sensitive customers.

Permisssion

Finally, the countrys biggest foreign direct investment has got the green signal. The

environment ministry on 31 January, gave its clearance to the Rs 50,000-crore

Posco integrated steel plant in Orissa on 31 January, relenting on its tough

insistence on absolute compliance with environment laws.

Environment minister Jairam Ramesh put 60 new conditions on the project, though

28 for the steel plant and 32 for the captive port but these are unlikely to be

high obstacles for the Korean promoters

Six-year saga
http://en.wikipedia.org/wiki/Steelhttp://en.wikipedia.org/wiki/Orissahttp://en.wikipedia.org/wiki/Orissahttp://en.wikipedia.org/wiki/POSCO_India#cite_note-POSCO-0http://en.wikipedia.org/wiki/Steelhttp://en.wikipedia.org/wiki/Orissahttp://en.wikipedia.org/wiki/Orissahttp://en.wikipedia.org/wiki/POSCO_India#cite_note-POSCO-0


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June 2005 | South Koreas Pohang Steel Co signs memorandum with Orissa govt to

set up Rs 51,000cr steel project, the biggest FDI in India. By end-2011 Posco hopes

to produce 12 million tonne of steel a year

Aug 2008 | SC upholds in-principle clearance for use of forest land but directs

environment ministry to probe alleged violations

Jan 2010 | Ministry says clearance for diversion of forest land subject to

implementation of Forest Rights Act

Aug 2010 | MoEF halts project, probes alleged violation of forest rights

Oct-Nov 2010 | Two inquiry panels of ministry recommend temporary withdrawal of

clearance; allege gross illegalities, accuse Posco and state govt of concealing

information. 2 of 3 internal inquiries echo findings

Jan 31, 2011 | Ministry clears steel & power plants and captive port


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CONCLUSION

In this case what I think can be a possible conclusion is

1. the government should double the compensation for the villagers

2. 2. the government should take proper care of the rehabilitation of the effected

farmers.

3. the project cannot be delayed because it is in favoyur of national growth and

India can become self-suffecient in steel production and also a leading steel

Exporter.

4. the government should make farmers understand that this project is i9n

nation interest it is in the interest of the whole country.

5. envioremental norms should be followed in setting up of the POSCO projrct.

6. The government should come out with a win-win formula for all parties for the

effected farmers and the nation and POSCO.


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BIBLOGRAPHY

1. The information has been taken from articles in ECONOMIC TIMES.

2. Some content is taken from wikipedia.org.

3. The view of the farmers have been taken from an interview of farmers with

THE TELEGRAPH news paper.

4. The view of government has been searched from ORISSA NEWS website.

5. The POSCO official view has been searched from ET.

6. The conclusion has been give been analyzing all views.


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WHY FARMERS OPPOSING POSCO PLANT

Farmers are opposing the POSCO steel Greenfield plant in district jagdishpur of odissawhich government of odissa proposed by signing an agreement with POSCO steel whichis the second largest steel producer in the world. The 12 million tones project is proposedon the agriculture land of the tribal farmers and the farmers dont want to give there landsand there occupation of betel leafs which has been there economy from centuries. Thefarmers say they dont want to give there lands and go away and settle because they like

there work of betel leaf and collecting of forest products and they dont want any changein there lifestyle at any cost. The government is giving them compensation for there landand planning for there rehabilitation some where else but they dont want to go and theydont want any money for forcable removal of them from there own land . They farmerssay that the land belongs to them and they are not in a view of giving it for a steel plant inthere area.

The farmers say that they dont want the plant to come on there cost and there life.

They farmers say that they are happy with whatever they earn from there economicactivities.

The government is offering them 17 lakh rupees per acree for peddy fields and 11.5 lakhper acre for other land. The government to lure them are also promising a job , a puccahouse and transport allowance to get the land from farmers for the much delayed 12million tones steel plant.

The farmers rejected this offer and termed the package as an act of betrayal


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The farmers say that chief minister should come here and see the green betel vine fields,the orchards and then think is it right to destro all this for a steel plant.

One farmer in an interview to telegraph told that he earns Rs 1 lakh per annum from hisbetel vine farming and this provide employment to 20 other families in the village .

He said if this plant comes up on there land it will bring them on streets as they will losethere livelihood.

Farmers also that betel vine farming is like a gold pot for them and rs 11. lakh per acre isvery little compensation they say it should at least be doubled so they can opt for someother work for there livelihood.

The farmers say that they have been mated out a raw deal as Essar had paid for 19.5 lakhthey are paing only 11.5 lakh betel vine land which is green and very fertile land

The farmers who are supporting the POSCO project also say that this is not a fair dealand they should be paid more because they are the most effected people from this projectthey are lossong their livelihood for the setting up the steel plant on there land.


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Odisha Government says that it will renew the Memorandum of Understanding(MoU) with POSCO for setting the `52,000 crore Steel Mill near Paradeep in

Jagatsinghpur district. It was announced by Steel and Mines Minster Raghu

Nath Mohanty. And this time the process has been started to extend the deal

period for a six years instead of five years.

He indicated that the renewal of the MoU was in advance stage of finalisation

and would be put in place soon. With the Union Ministry of Environment and

Forest on January 31 giving Clearance with conditions for the setting up of the

controversial multicrore POSCO steel mill and the captive port, the biggest FDI in

the country, the Odhisa Government had initiated steps to regularise the deal to

help start the work. The conditions put-forth by the MoEF for the proposed

integrated POSCO Project were also examined thoroughly and soon all the

points would be Complied with soon, said that Minister of Steel and Mines.

He indicated that the compliance is likely to be made within next three days to

the MoEF. Stating that the project would herald a new area of industrialisation

and economic growth in Odisha and the country as well, Industry Minister said

that the state government had already formulated a new recruitment policy for

the ongoing and upcoming industries with the main thurst of more employment of

locals.

He said that the same would be applicable to POSCO. As per the new Policy, 90

per cent of the required semi-skilled and un-skilled worked would be provided

employment in the POSCO.

Similarly, 60 per cent of the skilled jobs would be reserved for the locals and in

Managerial posts 30 per cent of the local people would be provided jobs in the

project, he said.

The MoU signed on 22nd June 2005 between the Government of Odisha and

POSCO for a period of five years had already lost its validity since August 2011.

The government says they are offering good compensation for the farmers land

for acquiring there land for POSCO project.

The government says that if the project comes in existence Odissa will become

the largest producer of steel as POSCO is a big company and has modern

technology and machinery for production of good quality of steel


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The government also says that this project if comes in existence then it will make

an economic enviorement in the state of Odissa.

The government say that this project will make odissa one of the most Indutrial

progressive states in the country.

The government says that it will increase the revenues of the government as it

will generate more taxes.This project will help India generate more revenues as a major part of the

production will be Exported abroad.

The government says that it will create a lot of jobs for both skilled and semi-

skilled employees both directly and indirectly.

WHAT POSCO SAYS

The.company POSCO says that it is not going to bakup from the project and the

government has initiated the move to sign the MOU again for setting up steel mill

in jagdishpur district of Odissa after the steel ministry has given its clearances for

the project.

The company says that India is an emerging Economy in the worl and POSCO is

in no mood of losing an opportunity of doing business in India .POSCO says that this Greenfield steel mill project is an ambitious project for us

and this will fuel up our growth opportunities in global markets.

POSCO officials say that this 12 million tones steel mill project will give POSCO

an edge over its competitors.


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the pohang iron and steel company

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